Travelling the Yellow Brick Road Together

Volume 23 ● Number 2 ● Summer 2016

Travelling the Yellow Brick Road Together Understanding and Promoting Small Business Growth and Entrepreneurship Part 2

Journal of the Association for Management Education and Development

Corporate Social Responsibility Perception and practice in small and mediumsized enterprises in Kilsyth, Scotland Ana-Paula Fonseca For a long time, Corporate Social Responsibility (CSR) has been built as a process and a strategic approach for businesses to be socially responsible. CSR is ‘a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis’(Commission of the European Communities, Promoting a European Framework for Corporate Social Responsibilies, 2001, p. 6). Decision-making within CSR is concerned with actions that create value for society whilst minimising impact on the environment, as well as fostering relationships between organisations and overlapping stakeholders concerned with morality, legal, environmental, ethical, and economic considerations (Needle.2015). According to Elkington(1997) measures of business success should consider people, planet and profits. However, societal expectations require organisations to be more socially responsible, not only in terms of ‘green’ and ‘health and safety’ agendas, but also with regard to their business activities (Sloan, et al., 2013). This responsibility is reflected in expectations from their relationships with a variety of stakeholders who can have a real influence on their operations. While CSR has been practised by large organisations, and a variety of research, orientations, regulations and codes have been developed to do this, SMEs encounter challenges and barriers in attempting to implement CSR.

This article discusses the experiences and

perceptions of six small enterprises in Kilsyth, Scotland, in relation to CSR. It will consider their business values, how they perceive CSR, how they take decisions in social responsibility; and also the entrepreneurial challenges and barriers that arise for them in attempting to practise CSR. The analyses of findings came from data collected from October 2013 to January 2014, and the research motivation was based on the inquiry questions ‘Why do enterprises need to be socially responsible?’ and ‘How far are SMEs currently able to practise CSR?’ (Carroll, A three dimensional conceptual model of

Why do enterprises need to be socially responsible? And why is there a gap between CSR in SME?

corporate performance., 1979; Russo & Perrini, 'Investigating Satkholder Theory and social capital: CSR in large firms and SMEs, 2010; Bowen, 1953). Key words Corporate Social Responsibility (CSR); Small and Medium-sized Enterprise (SMEs); stakeholder; entrepreneur.

e-ORGANISATIONS & PEOPLE, SUMMER 2016, VOL. 23, NO. 2

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Introduction Small and Medium-sized Enterprises (SMEs) in Scotland have played key roles in contributing to economic growth, employability and exporting.

They account for 99.4% of all private sector enterprises, are

responsible for 55.6% of private sector employment and 39.4% of private sector revenue generation. The top five international export markets (USA, Netherlands, France, Germany, and Norway) accounted for £10.8 billion of international exports (39% of all international exports) from Scotland (Scottish Government, Export Statistics Scotland, 2014).

Besides that, more than 65% of Scottish SMEs are run as family-

business (Scottish Government, 2014; Scottish Enterprise, 2015). In addition to a desire to investigate and understand the practice of CSR in Scottish SMEs, I was also interested in identifying any conflict between firms’ concerns for profits and their social impact. As such, two further questions become relevant: ‘Why do enterprises need to be socially responsible?’ and ‘Why is the practice of CSR so patchy in the sample SMEs?’ These inquiries were used as the bottom line to build connections between My research aim and objectives arose from these inquiry questions (see Table 2 below).

CSR in business: an historical context In addressing these questions, a brief overview of the historical context of Social Responsibility in business is useful. After the Great Depression of the 1930s, the literature Bergan to define social responsibility in business as being the obligations of the ‘Businessman’ (sic) to pursue and take decision in their business activities for the welfare of society at large (Bowen, 1953; Berle & Means, 1932). The following list summarises key drivers underpinning business and entrepreneur behaviour towards social responsibility that have appeared in the literature: An overview of recent literature on CSR 

Social responsibility in business has grown since the 1930s from business principles of charity and stewardship (Bowen, 1953; Sims, 2003; Acquier, et. al., 2011).



Social responsibility is associated with human rights based on human interaction among society, business, and government with a degree of trustworthiness between their networks (Bowen, 1953; Coleman, 1990; Bourdieu, 1986).



Entrepreneurs have the power to judge and produce goods and services, and to distribute income to workers and owners. Enterprises are well placed to influence society through entrepreneurs who make decision of managerial value (Porter, 1991; Freeman, et.al., 2010).



In the 1960s, CSR theory expanded, proposing a link between social responsibility and business power. This raised the issue of whether or not entrepreneurs should accept social responsibility as an obligation, or whether other groups should assume those responsibilities and the power that goes with them (Davis, 1960; Carroll, 1999).



CSR has focused on issues arising from the relationship between the enterprise and its stakeholders and the enterprise and its environment. These include the interaction of business ethics, corporate citizenship and corporate accountability (Sloan, et.al, 2013).


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

‘Corporate Social Responsibility is the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large’ (WBCSD, 1998).



However, it has been argued that, from an economic perspective, social responsibility is not a responsibility of business Friedman (1971). According to this view, “in a free enterprise, private property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom’” (Friedman,1971, p. 13).



Another dark side of CSR is whether entrepreneurs are motivated by a wish to operate ethically, or to avoid being taken to the court.

Does CSR represent a change in the ethical values of

organisation, or is it rather a strategy aimed at maximising profit and shareholder value maximization (Needle, 2015). As Van der Merwe, et al. (2003) pointed out, having ethical codes is not per se a guarantee of excellent performance.

Outstanding CSR challenges for entrepreneurs Despite these advances, entrepreneurs still encounter significant challenges, such as a lack of time and finance, rising labour costs, lack of regulation and compliance, and sustainability issues.

Thus, to

understand and investigate the practice of CSR in SMEs, and entrepreneurial challenges and barriers that arise in attempting to CSR, I interviewed six entrepreneurs in Kilsyth, a town in North Lanarkshire, Scotland. Kilsyth (see Fig 1 below) is an important commercial centre and has experienced relevant economic growth in traditional family-owned shops, two stocked supermarkets, and a wide range of personal and business services (Kilsyth Community Council, 2013). Fig.1 Map showing the geographical location of Kilsyth:

Source: http://www.weather-forecast.com/locations/Kilsyth


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It’s worth noting that Kilsyth achieved awards in the Beautiful Scotland Campaigns in both 2009 and 2010. It also hosted the National Walkers Conference of 2010, and won the Bronze Award for the Strong and Sustainable Communities Category of the Local Government COSLA Awards Scheme (2013), as the following images illustrate.


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Profiles of participating SME in my sample: SMEs participants in the sample had different types of profiles, such as in size of their business, in numbers of staff and in category of business, (see table1 below): Table1 Profile SMEs Enterprise A Café

Enterprise B Hotel

Enterprise C Local Estate Agent

No. of Employees

6

44

4

Years in Business

7

42

12

Market Location

Regional and running as a not for profit

Regional and running as a family business with status for profit.

Regional and running as family business with status for profit.

Main activity

Established by Church to support local community, they have the highest quality products, such as the coffee with ‘Soil Association Organic Standard’ certificate

Accommodation provides a good atmosphere, with many facilities with a huge experience in this sector.

Independent state agency with wide portfolio properties for letting and selling.

Enterprise D After School Club

Enterprise E Specialist plumbing

Enterprise F Butcher

No. of Employees

10

5

5

Years in Business

8

4

23

Market Location

Regional and running as a not for profit.

International and running as a profit and non-family business.

Regional and running as family business with status for profit.

Main activity

Provides a professional out of school club and services with a range of activities such as arts and crafts, computers, music and so on.

Provide temporary water solutions for emergency and short-term rental marketplace.

A traditional local butcher and all products come from regional farms and markets around local area.

I chose qualitative method research as the most suitable approach for this purpose. This acknowledges the social context of people (in this case, entrepreneurs) who are actors involved in the investigative fieldwork (Denzin & Lincoln, 2011). I conducted semi-structured face-to-face interviews as a guide to allowing me as researcher to explore other topics that emerged during the process.

Research themes identified from the literature: 

Business values in SMEs (Freeman, et al., 2010; Spence, 1999, 2007);



How far they have attempted to practise their social responsibilities (Carroll, 1979, 1983, 1999, 2012);



Their perceptions of CSR (Fassin, 2008; Acquier, et al., 2011);



Which stakeholders influenced and are influenced by CSR-related decision within the SMEs (Russo & Perrini, 2010; Van der Merwe, et al., 2003; Spence & Rutherfoord, 2001).


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Table 2 below outlines my specific research questions. Table 2 SME CSR Interview Instrument: RESEARCH QUESTION (RQ)

INTERVIEW QUESTION

RQ 1

What are the business values for SMEs and how are they oriented?

IQ 1. IQ 2.

What are the values/ideas that drive your enterprise? How do you incorporate these values into business activities?

RQ 2

How is CSR perceived by SMEs?

IQ 3.

What is your understanding of the term ‘CSR’ – Corporate Social Responsibility? Do you think that your business is social responsible? If so, how do you make it?

IQ 4. RQ 3

How do SMEs participate in CSR?

IQ 5. IQ 6.

RQ 4

Which stakeholders influence CSR participation in SMEs and to what certain extent?

IQ 7. IQ 8.

Is there any predetermined budget for such expenses? If so, what factors affect them? Would you give priority to any of the following options in your business? Could you please tell me how decisions of CSR are taken in this enterprise? If answer is no, why not does it occur? To what extent do your stakeholders influence such decisions?

The next section discusses some of my findings.

SMEs: the role of values Among values and ideals which drive each enterprise, the key motivators cited by the SME participants were to demonstrate that they could generate profits; provide a quality service; show trustworthiness and respect; and build client satisfaction and personal relationships with employees and the local community (Fassin, 2008; Freeman, et al., 2010). All of the SMEs in my sample voiced concerns with these key drivers, but with varying degrees of importance. For example, all participants averred that ‘maximising profits’ remains the core of business.

Next in importance comes customer satisfaction, followed by staff development and

training, then giving back to the local community, doing informal social actions, and lastly, earning trust and respect, as Figure 3 below showi illustraes. Clearly, for the SMEs in my sample, the core purpose of business is to ‘make profits’: Figure 3: Values expressed by participating SMEs:


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It is important to note that, all small business participants in the sample have been engaged in economic activity within the local Kilsyth community, and have been making a contribution through providing employment, local sponsorship, and other forms of economic and social development. Trustworthiness was considered a value that is interneconnected and intertwined with other values. This is an expected finding, because businesses rely on the host society within which they operate, and could not exist or prosper alone (Porter & Kramer, 2006; 2011). However, it is clear that the core value which drove this entrepreneurial activity was to maximise pure profits. Enterprise C said: “the other value obviously, is business to make money”. A hallmark of capitalist societies, borne out in particular in this case, is that businesses need to generate profit for survival (Friedman, 1970).

The practice and perception of CSR by SME participants Figure 4 below reveals that the specific terminology of ‘CSR’ was perceived by respondents as largely unfamiliar, immaterial and unimportant. This aligns with the view of Murillo & Lozano (2006, p.232) that ‘the terminology of CSR appears distant and even possibly inoperative or counterproductive’. These results would indicate that there is more work to be done to explore with SME entrepreneurs in greater detail their understanding of the concept of CSR (Aupperle, et al., 1985; Fassin, 2008): Figure 4: Entrepreneurs’ response to understanding the term Corporate Social Responsibility ‘CSR’:

According to Moore & Spence (2006) the current criteria used to measure ‘CSR’, derived from work with large corporations, may be inappropriate when applied to SMEs. Hence, the word ‘corporate’ may not be appropriate in the context of SMEs (Castka, et al., 2004; Fassin, 2008). I would suggest that it may be more appropriate to adopt a new term: ‘Small Business Social Responsibility (SBSR)’.


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SMEs’ engagement with a socially responsible agenda To investigate the practices that SMEs used in making decisions to fulfil their social responsibilities, I presented to participants some common examples. Drawing upon existing literature (Nooteboom, 1994; Russo & Perrini, 2010; Fassin, 2008; Freeman, et al., 2010; Carroll, 1999), I created a table showing some typical activities associated with CSR as a guide, to discover which kind of social actions entrepreneurs in my sample have been implementing in their business activities (see Table 3 below). Table 3: CSR Practices of SMEs in my sample CSR Practices Make donations for better cancer treatment Give additional medical benefits to employees Sponsor a local football team Fund a community group which opposes smoking Financial support for employees to enhance professional skills Control energy usage to reduce operational costs. Other options

SMEs A

B

C

D

E

F

 



















 Local charities

Waste management





 Food Bank

Specialist plumbing

Donations for pet owners

The result of this analysis reveals that entrepreneurs’ decision-making about their social responsibilities is informal and governed by self-interest. In line with Russo and Tecanti (2009), these findings confirm that SMEs in this study did not make any strategic plans or set aside a pre-determined budget for the expenses associated with their informal actions. These informal actions were influenced by a range of variables, such as different organisational characteristics, number of employees, interpersonal relationships within the local community, and also whether control of the business was centralised with one person who made personal decisions on the allocation of resources (Nooteboom, 1994; Russo & Perrini, 2010). According to Fassin (2008, p. 375) SMEs consider their ‘informal activities as being normal, simply because they feel right, because it is the decent thing to do and ought to be done’. Although, in comparison with large corporations, it is difficult to identify specific measures such as finances and time that are devoted social responsibility agenda in small businesses, we can say that they take second place alongside other routine duties, such as performing the roles of management and decision-making for solving day-by-day problems (Moore & Spence, 2006; Spence, 2007, Russo & Tecanti, 2009; Tilley, et al., 2003).

Generally speaking, SMEs

compare unfavourably with large organisations in terms of resource availability (Nooteboom, 1994), marketing and strategy (Spence & Rutherfoord, 2001). They also find it difficult, or find sufficient money, to obtain access to achievement certificates and sustainability information tailored to the needs of small businesses about ‘how’ or ‘what’ could be the right way to take action in social responsibility. Enterprise B said: “I think the information sometimes is difficult to find it… if we want to find it by the Council website, we have to be a kind of ‘Philadelphia lawyer’ to understand and get it”.


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Stakeholder influence in SME decision making A particular research problem emerged during this study. Entrepreneurs could not readily identify who the stakeholders are within or outside their business. The relationship between stakeholder and SMEs tended to be based on personal, informal, trust-based relationships. These are; characterised by intuition, when compared with the more formalised dynamics of power and influence of larger organisations with their stakeholders (Johnson, et al., 2011; Porter, 1980; Beaver, 2002).

In addition, entrepreneurs’ decision-

making was influenced by self-interest and an absence of considered management strategic decisions. Hence, the crucial functions of stakeholder management - which are to describe, understand, analyse and, finally, manage expectations of the various stakeholder groups - were not evident (Carroll, 1991; Johnson, et al., 2011). Entrepreneurs in the sample appear to lack information and awareness about the importance of stakeholders, as well as of CSR within their business activities (Freeman, et al., 2010; Russo & Perrini, 2010).

Conclusion The evidence from this small study suggests the need for a deeper and wider investigation in other parts of Scotland to make comparisons between larger samples of SMEs with a view to developing a CSR strategic plan appropriate for SMEs.

This project would require partnerships among local councils, the Scottish

Government, Higher Education Institutions and other key stakeholders. My initial study suggests that a ‘Small Business Social Responsibility (SBSR)’ strategic plan, based on CSR components would be useful. This would address SMEs’ economic, legal, ethical and discretionary responsibilities (Carroll, 2012). Suitably adapted and applied, the principles of CSR could become sources of competitive advantage for SMEs, with reciprocal benefits for both enterprises and broader society (Porter & Kramer, 2006). Respondents made it clear that easier access to knowledge, training and public funding would greatly encourage and support them as entrepreneurs in paying greater attention to their social responsibilities. According to the European Commission (2014), SMEs have been essential to employment growth. In 2013, SMEs were responsible for employing 88.8 million people in 28 member states of the Europe Union, and they have also been a key driver for economic growth, innovation and social integration (Commission of the European Communities, Annual Report on European SMES 2013/2014: A Partial and Fragile Recovery, July 2014). Finally, in the context of globalisation, entrepreneurs simply cannot ignore issues of environmental protection, social accountability, and ethics education, and must be supported in addressing these issues effectively.

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About the author Mrs Ana-Paula Fonseca is a PhD student and Teaching Fellow at School of Business & Enterprises at the University of the West of Scotland (UWS), UK. She joined UWS University in 2013 as a MBA student, and in 2014 embarked on a PhD in business research, as well as teaching on programmes about strategic business projects. Ana’s research interests include business ethics, strategic management, stakeholders and social capital theory – a theory of trust and networks. Upon completing undergraduate studies in the Technology of Managerial Process at University of Castelo, Rio de Janeiro, Brazil, Ana worked in large organisations and small businesses, and also started two small enterprises in Brasilia and Porto Alegre, Brazil. Ana came to Scotland to improve her career and as a consequence her ‘dreams come true’: she achieved her MBA First Class Honours Degree and was accepted for doctoral studies. Ana is an ISBE member and received a commendation for the best abstract at UWS. You can contact Ana @ [email protected].


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